SSU Forum “Economic Security: Perspectives from China and the European Union”

On August 7, the Security Studies Unit (SSU) of the Institute for Future Initiatives, The University of Tokyo invited Mr. Hotaka Machida (Senior Research Fellow, Panasonic Research Institute, Ltd.) and Dr. Michito Tsuruoka (Associate Professor, Faculty of Policy Management, Keio University) to give keynote addresses on the economic security policies of China and the European Union. Following their presentations, Mr. Akira Igata (Project Lecturer, Research Center for Advanced Science and Technology, The University of Tokyo) joined the discussion. The forum closed with a Q&A session to address questions from the audience. Dr. Ryo Sahashi (Associate Professor, International Relations Institute for Advanced Studies on Asia) served as the moderator of the forum.

Keynote address
Mr. Hotaka Machida

Mr. Machida outlined the shift in how the Chinese government has positioned the concept of security, particularly economic security, over time, referring to the past contexts and recent policy trends. More specifically, he pointed out that “economic security” is an ambiguous concept in China, and there is no clearly defined meaning of the concept in the Chinese language. After introducing some key findings from the previous research, he examined how the Chinese government has dealt with issues of economic security, quoting the statements of past leaders and with reference to the process of China’s domestic legislation development.

Additionally, Mr. Machida explained how China’s approach to economic security used to be focused on protecting and ensuring the stability of its domestic economy, but explained that there have been recent observations regarding a change in this approach since 2018 (expansion into such areas as protecting intellectual properties and domestic industries, and securing the supply chain). In fact, China began changing its perception of “security” as it experienced U.S.-China conflicts under the Trump administration and the following decoupling and export restrictions imposed by the U.S. and Europe. It is now shifting its focus to reducing dependence on Western economies, increasing independence of its domestic economy, and securing domestic capabilities, as represented by the concept of domestic-international dual circulation. Based on this recognition, Mr. Machida introduced and analyzed recent trends of each of the following initiatives as specific examples of China’s shift: (i) Building a supply chain that concludes within China’s territories (to promote domestic production of goods and transfer of production bases to China) ; (ii) Expanding the use of renminbi (Chinese yuan) in international transactions (to ensure the security of Chinese economy even if China is excluded from the international settlement system based on U.S. dollars); (iii) Promoting science and technology innovation (to develop human resources with advanced skills and secure the ability to independently innovate). He concluded his presentation by presenting some specific proposals to the Japanese government and businesses.

Dr. Michito Tsuruoka

Dr. Tsuruoka explained EU’s position on economic security and its economic relations with China, based on ongoing discussions in the EU and the contexts of past policies.

He began his presentation by explaining how China is positioned in the eyes of EU policymakers, how China’s relative position to EU has transitioned between being a “partner,” “competitor,” and “rival,” and what EU policymakers specifically mean when they talk about “de-risking.” He then analyzed EU’s heightening sense of crisis in the context of U.S.-China rivalry and the potential of leveraging its comparative advantage on the economic front, citing these factors as the background of EU’s economic security policies. While emphasizing that EU’s economic security policies are not targeted at China alone, but rather the whole world (consideration of WTO rules, avoiding the risk of unnecessarily stimulating China, and persistent concerns over U.S. actions (IRA, GAFA, etc.)), Dr. Tsuruoka also pointed out that EU is enhancing various economic security tools to protect itself and contain China, citing investment screening and anti-coercion instrument (ACI) as concrete examples of such tools. Referring to the European Economic Security Strategy announced in June 2023, he explained that the largest remaining challenge in responding to the various risks facing EU was regulating outbound investment. Finally, he concluded by listing the following challenges facing Europe’s economic security strategy against China: the conflict between economic security and the principles of free trade and free market economy, differences in the awareness and interests of EU member states, partnership with the U.S. and allies, and concerns over the growing protectionism of the U.S.

Discussion and Q&A
Discussion

Following the above presentations, Mr. Igata commented in response. Regarding Mr. Machida’s presentation, Mr. Igata pointed out that the idea of “economic security” as an area where economy and security overlap has a long history, and it is important to take note of the difference with the recent concept of “economic security” as discussed in present-day contexts. In this sense, he raised several questions as to: at what point in time, did the term “economic security” that is used today took root, according to Mr. Machida’s analysis; why Made in China 2025 was not included in the development history of economic security in China; and why Mr. Machida chose the three perspectives of (i) supply chain, (ii) renminbi, and (iii) science and technology innovation policies. Mr. Igata suggested that the analysis would become even more meaningful by incorporating such viewpoints as economic coercion, changes in public-private collaboration, and the Belt and Road Initiative. He also asked about the actual progress of “reshoring” and “friend-shoring” efforts by China and about the business support provided by the Japanese government, specifically which elements Mr. Machida considers insufficient in the supply chain support program under the Economic Security Promotion Act.

With regard to Dr. Tsuruoka’s presentation, Mr. Igata pointed to the need of including Russia in the perspective for understanding Europe’s economic security policies, especially from the viewpoint of energy security. He also expressed his hopes for future research to answer questions like: what the division of roles is (difference in competence) between the European Union and individual member states in implementing economic security policies; whether human rights and investment agreements should be included in the scope of economic security (How do the EU and Dr. Tsuruoka define the scope of economic security?); and whether there are differences between EU member states regarding the definition of economic security and the priority level of individual policies, and how those differences affect EU’s economic security policies.

In response to Mr. Igata’s comments, Mr. Machida explained that for the purpose of his discussion he adopted the broad definition of economic security as “the area where economy and security overlap.” As to the question of when the term “economic security” used in China today took root, he answered that although it is difficult to say exactly when, he believed that China’s security awareness was heightened from around the time when the prolonged U.S.-China confrontation started since the Trump administration. As to why he highlighted (i) supply chain, (ii) renminbi, and (iii) science and technology as examples of China’s shift, he answered that China’s recent efforts to reduce reliance on foreign actors and strengthen independence were most evident in those three areas. Regarding the Belt and Road initiative, Mr. Machida shared his view that China is now in the phase of diverting its funds and technology resources to support Chinese enterprises to expand into developing countries using the Belt and Road initiative, while reducing its dependence on the Western world.

Dr. Tsuruoka commented that his presentation was rather focused on EU’s stance on China due to the theme of the forum, but when taking a broader perspective to the economic security of the European Union, its efforts to end reliance on Russian fuel and impose sanctions on Russia have critical importance. With regard to the differences between EU and its members states surrounding the competence and authority related to economic security, Dr. Tsuruoka emphasized that it is a problem the EU has been struggling with for many years. For instance, it looks as if the Netherlands instead of EU is taking leadership over export control of semiconductor manufacturing machines. According to Dr. Tsuruoka, the scope of economic security is defined differently in Japan and the EU. He thinks Japan tends to narrow the scope of economic security, whereas in the EU, matters like human rights and sanctions are often discussed in the context of economic security, which is a point that needs to be kept in mind.

Q&A

Following the discussion, Dr. Sahashi introduced some questions submitted from the audience. Questions for Mr. Machida included: How does China view the economic security policies of EU? How far will the scope of China’s dual circulation extend beyond the technologies and industries deemed as “key areas”? What do you think of China’s counter espionage law? Is it right to view economic security solely from the perspectives of democratic countries represented by the G7 nations or is it possible to understand economic security from an alternative perspective rooted on the part of China? Questions for Dr. Tsuruoka included: How is Japan positioned in EU’s economic security policies? How will the EU try to manage its economic and security relations with China while taking into account its strong military ties with the U.S.? (How will the U.S. factor into EU’s economic security strategy?) What are the differences in perception between EU member states, especially those of Eastern Europe?

In response to the questions, Mr. Machida stated that China’s concerns are mostly focused on the U.S. at the moment. China is seeking ways to cooperate with the EU and maintain a friendly relationship to prevent the EU from taking sides with the U.S. against China. As for the scope of dual circulation, Mr. Machida thinks it is unlikely that it will expand to include all industries. Although China will continue to seek independence of domestic industries, it will not go so far as isolating the country from other nations. The counter espionage law can be seen as simply putting into legislation what China has always been doing, but it also signifies that China’s awareness for national security is heightening, which is something we need to take note of. Regarding the question of how we should perceive economic security, I think that Japan’s approach to economic security compared to our policy toward China should be different from that of the U.S. and Europe, and in fact, it has been different. I don’t think that everyone in the CCP is so preoccupied with national security concerns in their attitude toward Japan, so we should embrace the connections we have with those people and seek to develop Japan’s own policies.

Dr. Tsuruoka stated that while economic security is an important agenda in Japan-EU relations, specific measures for cooperation have not been materialized yet. The gap between Europe and Japan in the perception of such issues as human rights and democratic values may become an obstacle to cooperation. If Japan seeks to develop its own economic security policies, it needs to seriously consider how it intends to approach these issues, as it is also important for Japan to emphasize the common values shared with U.S. and Europe. Turning to the question of the “U.S. factor” for EU, Dr. Tsuruoka explained that when EU talks about strategic autonomy, it means the autonomy of the process rather than the output, that is, EU wants to maintain the autonomy of its decision-making process even if the resulting decision or interests to protect were the same as the U.S., which is something important for us to understand. Regarding differences between western and eastern Europe, there is significant difference within the EU. Middle to eastern European states are not very interested in investment screening because they don’t have technologies to protect in the first place, but on the other hand, they are keen on ensuring energy security against Russia. These differences, however, cannot be simply divided between east and west, but rather mixed and in various shades of gray depending on the issue and industry sector.

* The forum was organized by subsidies from the Ministry of Foreign Affairs of Japan for research on diplomacy and security.

* Only Japanese audio is available.

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